The Sky Might Fall... Maybe
I had the opportunity to have breakfast with Ms. Tucker Heart-Adams, who is the Chief Economist of Aquila Funds. Despite a dismal C+ in Econ back in college, I was thoroughly fascinated with her insight.
She mentioned some interesting facts and predictions for the future of our economy.
We are in a time of "Stable Disequilibrium" she said. This means we look stable on the surface, but give it a bump and things destabilize and things are volatile.
We look stable because:
- Corporate Profits are at a record level and have large cash sums, which makes our economy strong.
- The US has 5% of the world's population and 32% of the worlds consumption, which suggests we are wealthy, but also a bit overboard with spending.
We are in Disequilibrium because:
- Consumer debt is increasing.
- Homes are mortgaged two times for full value.
- Spending stayed steady through recent job losses.
- We use our homes as an ATM instead of an investment
- Interest rates are rising
- Housing foreclosures are increasing
- 2005 was one of 3 years of US history when savings was a negative. (The other two were 1932 and 1933 which was of course the depression era.)
My reaction isn't to go bury my head in the sand during 2007, but rather figure out how to make money off of other's failure. For this I like the check cashing business... but not the bullet proof glass you have to stand behind.